Photonics is a promising candidate technology for information processing, communication and data storage1,2,3. Essential building blocks, such as logic elements and modulators, have been demonstrated4,5,6. However, because of weak nonlinear light–matter interactions, these components typically require high power densities and large interaction volumes, limiting their application in dense chip-based integration. A solution may be found in surface plasmon polaritons (SPPs), guided electromagnetic waves that propagate with high field confinement along a metal–dielectric interface. We demonstrate an all-optical modulator in which efficient interaction between two light beams at different wavelengths is achieved by converting them into co-propagating SPPs interacting by means of a thin layer of CdSe quantum dots (QDs). The high SPP field confinement and high QD-absorption cross-section enable optical modulation at low power densities (∼102 W cm−2) in micrometre-scale planar devices.